How Does Rent To Own Work in Georgia?
November 30, 2022
Georgia renters looking to buy a home may not be in the best position to pay a down payment and the costs associated with buying a house. However, there are still options for those that want to pursue owning a property without fully committing. Rent-to-own homes provide a pathway to ownership without the burden of having to come up with a down payment upfront.
Many Georgians have turned to rent-to-own homes as an alternative to the traditional home-buying process. So, what is the rent-to-own process, and how does rent-to-own work in Georgia? Continue reading to find out.
What Are Rent-To-Own Homes in Georgia?
Rent to own is an agreement where tenants sign a lease with an option or requirement to buy the property once it expires. The contracts typically include the monthly rent, the monthly portion going to the down payment, a set period of time, and a locked-in purchase price. The rent-to-own option gives the tenant time to make the down payment and build their credit score while keeping the property they love for themselves.
How Does It Work in Georgia?
Rent-to-own contracts usually come in two forms: lease-option and lease-purchase. Lease purchase contracts require the tenant to purchase the property at the end of the lease term. This type of contract can be dangerous to get into if you still aren’t eligible for a mortgage at the end of the contract. In contrast, lease option contracts give tenants the option to purchase the property at the end of the lease term, but it is not a requirement.
Lease options are often the preferred option for rent-to-own contracts in Georgia. In both leases, the tenant typically makes a non-refundable upfront payment as a good faith deposit or as a portion of the down payment.
Guidelines For The Lease Purchase Agreement
The monthly rent can be extremely enforced in rent-to-own contracts and landlords can evict a tenant if even one payment is late. There are standard guidelines for what is included in a rent-to-own agreement. Rent-to-own agreements will have a set period of time and many other components that make up the contract. Here are some standard components to look out for:
Monthly Rent. The rental rate will be set in the contract and the tenant is responsible for paying it.
Upfront Payment or Option Fee. Depending on the agreement, there may be an upfront payment as a good faith deposit or as a portion of the down payment (1 to 5%).
An Agreed Upon Purchase Price. The purchase price of the home is set in the contract at the time it is signed. The price is usually higher than the current market value to account for the possible rise in the value of the home during the rent-to-own period.
Maintenance Roles. This outlines how the tenant and landlord will handle the property’s repairs, maintenance, and upkeep. The landlord is responsible for the maintenance in regular rentals but in rent-to-own agreements, there could be a stipulation put into the contract that puts the responsibility on the tenant.
Monthly Down Payment Contributions. The contract should state how much of the monthly rent will additionally go towards the down payment.
Period of Time. This is how long the tenant will be renting the home before they have the option to purchase.
Watch Out For Scams
Unfortunately, people are taken advantage of in rent-to-own agreements. Tenants in a rent-to-own agreement largely don’t end up purchasing the property either because of a lack of funds or not being eligible for financing.
Property owners can also use rent-to-own agreements as a way to make more money by increasing rent and terminating the agreement terms. Scams are a real issue in rent-to-own programs. If you plan to sign a rent-to-own contract, make sure to have a real estate attorney look the agreement over to make sure you are protected and the contract is valid.
Top Real Estate Agents Can Help You Make The Best Decision
Although rent-to-own programs have potential benefits, they are still a major commitment and come with inherent risks. They often cost more than if you bought the property outright and can end up being a waste of money if you don’t eventually own the property. However, in some circumstances, renting to own homes can be a great way to transition into homeownership.
Negotiators are great real estate agents that can help you determine what option is best for your finances and needs. They can also help you find rent-to-own programs in Georgia that are reputable so that you make an educated decision.